Agreed.

1933 BUDGET

Resume of Changes in Sales and Excise Taxes

The following goods, formerly exempt from tax, now taxable at the full rate in force:

Self-raising flour, oatmeal, rolled oats, corn-meal and rolled wheat, when in packages exceeding five pounds each in weight; buckwheat meal and pea meal; pearl barley; split peas; barley meal; pot barley; rice, cleaned; macaroni and vermicelli; bran and middlings when sold for human consumption in packages exceeding five pounds each in weight;

Molassescorn syrup; sugar cane syrup;

Fuel in liquid form;

Calcium carbide;

Carbolic or heavy oil, to be used only in creosotoing logs and round unmanufactured timber;

Materials, not to include plant equipment, consumed in process of manufacture or production, which enter directly into the cost of goods subject to the consumption or sales tax, manufactured or produced by a licensed manufacturer or producer;

Articles and materials, not to include permanent equipment, which enter into the cost of manufacture or production of goods manufactured or produced by a licensed manufacturer or producer;

Wrought, seamless or lap-welded iron or steel tubing, less than four inches in diameter,

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threaded and coupled, or not, when used only in oil wells, and materials used in the manufacture of such tubing;

Machinery and apparatus used only in the pumping of crude oil out of wells, and articles and materials used in the manufacture of such machinery or apparatus;

Goods enumerated in customs tariff items:

64. Sago and tapioca;

*219a. Non-alcoholic preparations or chemicals for disinfecting, dipping or spraying, n.o.p.;

*219e. Non-alcoholic preparations or chemicals, such as are used for disinfecting, dipping ot spraying, when in packages not exceeding three pounds each, in weight;

Dry preparations used for the same purposes as goods enumerated in items 219a and 219c;

391a. Castings, of iron or steel: being ingot moulds for use in the production of steel;

409o. Equipment for generating electric power for farm purposes only, viz: engine, gas tank, generator, storage battery and switchboard; and complete parts of all the foregoing;

410c. Machinery and apparatus and complete parts thereof for use exclusively in producing unrefined oil from shales, not to include motive power, of a class or kind not made in Canada;

410d. Well-drilling machinery and apparatus, and complete parts thereof, of a class or kind not made in Canada, and seamless iron or steel tubing over eight inches in diameter, for use exclusively in drilling for water, natural gas or oil, and in prospecting for minerals, but not to include motive power; including goods enumerated in this item of a class or kind made in Canada;

410e. Well-drilling machinery and apparatus and complete parts thereof, and rope twenty-one hundred feet and over in length, capable of drilling wells of two thousand feet and over in depth, of four inches and over in diameter, and of raising and lowering casing over four inches in diameter for such wells, for use exclusively in drilling for water, natural gas and oil, and in prospecting for minerals, not to include motive power;

410f. Machinery and appliances of iron or steel, of a class or kind not made in Canada, and elevators, and machinery of floating dredges, for use exclusively in alluvial gold mining;

410g. Articles for use exclusively in^ the metallurgy or smelting of iron, viz.: machinery and apparatus for sintering or nodulizing iron ore, concentrated or not, or flue dust; machinery and apparatus for use exclusively in the construction, equipment and repairs of blast furnaces for smelting iron ore, such machinery and apparatus to include hot blast stoves and burners, blast piping and valves connecting the blowing engines with the furnace, scale cars, charging and hoisting apparatus, blast furnace gas piping, cleaners and washers; and integral parts of all the foregoing, but not to include wrought iron pipe or valves 104 inches and under in diameter, nor structural iron work;

410k. Machinery and apparatus, of a class or kind not made in Canada, for use exclusively in handling ore and other materials to be charged into the blast furnace, from the dock, car or stock pile, at the smelting works;

4101. Ore crushers, rock crushers, stamp mills grinding mills, rock drills, percussion coal cutters, coal augers, rotary coal drills, n.o.p.,

* See under " Unenutnerated" next column for changed item.

and ' complete parts of all the foregoing, for use exclusively in mining, metallurgical or quarrying operations;

410m. Diamond drills and core drills, not including motive power, and electrically operated rotary coal drills, of a class or kind not made in Canada, and integral parts of the foregoing, for use exclusively in mining operations;

410n. Diamond drills and core drills, not including motive power, and electrically operated rotary coal drills, n.o.p., and integral parts of the foregoing, for use exclusively in mining operations;

410o. Coal cutting machines, n.o.p.; coal heading machines; electric or magnetic machines for concentrating or separating iron ores; automatic scales for use with conveyors; and integral parts of all the foregoing, for use exclusively in mining or metallurgical operations;

410p. Sundry articles of metal as follows, for use exclusively in mining and metallurgical operations, viz.: furnaces for the smelting of ores; converting apparatus for metallurgical processes in metals; machinery for the extraction of precious metals by the chlorination or cyanide processes, not to include pumps, vacuum pumps or compressors; blast furnace blowing engines for the production of pig iron; and integral parts of all the foregoing;

410q. Pumps and vacuum pumps, and complete parts thereof, for use exclusively in the extraction of precious metals by the chlorination or cyanide processes;

410s. Amalgam safes; automatic ore samplers; automatic feeders; retorts; mercury pumps; pyrometers; bullion furnaces, amalgam cleaners; and integral parts of all the foregoing, for use exclusively in mining or metallurgical operations;

410z. Machinery and apparatus, n.o.p., and complete parts thereof, for the recovery of solid or liquid particles from flue or other waste gases at metallurgical or industrial plants, not to include motive power, tanks for gas, nor pipes and valves 10J inches or less in diameter;

431. Shovels and spades, of iron or steel, n.o.p.;

431a. Axes;

439d. Freight wagons, drays, sleighs, n.o.p., and complete parts thereof;

1017. Lap-welded tubing of iron or steel, not less than four inches in diameter, threaded and coupled or not, when used in casing water, oil and natural gas wells, or for the transmission of natural gas under high pressure from gas wells to points of distribution;

Mr. COOTE:

What is contained in the list?

Mr. RHODES:

It contains a resume of the changes made in the sales tax, with respect to the budget.

Mr. NEILL:

The minister mentioned something about the stabilization fund. It seems to me desirable that there should be some opportunity to discuss this matter. As the payments are going to be made out of relief moneys, it appears to me that unless the minister is kind enough to provide an opportunity, we will not have one.

Mr. RHODES:

After we have concluded our several items in committee, and just before reporting, I should be perfectly content if by unanimous consent there should be a discussion in committee of the stabilization fund. In response to a word the right lion, leader of the opposition had with me to-day I made the suggestion that we might move the house into committee on Monday or Tuesday, thereby affording an opportunity. However, I agree with the view taken by the right bon. gentleman that perhaps we could have a better discussion in committee, when we would not be confined to a single speech. If that arrangement suits other hon. members I am content that such procedure should be followed.

Mr. NEILL:

Thank you.

Mr. ANDERSON (High Park):

I wish to revert to the matter which has been raised by the hon. member for North Waterloo (Mr. Euler). As hon. members may recall, the sales tax was discussed last year. If I remember correctly, the movement was initiated from a complaint made by the biscuit makers, who had been taxed three per cent. The cake and pie makers were not taxed. For that reason the biscuit makers felt they had suffered an injustice. A complaint was made, and as a result the whole matter came under consideration. To the chagrin of the biscuit makers, instead of the tax remaining at three

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per cent it was raised to six per cent. They are to-day feeling the pinch, the same as other manufacturers.

The minister has said that the greater part of the tax is paid by the larger manufacturers. Since Friday I have been approached by representatives from the three largest baking concerns m Toronto. They state that although they have paid the tax and have not made any abjection that, as a matter of fact, it has not come out of earnings but, as one put it, has come out of capital account. As the other one said, "It is simply adding to our deficits, so that it is not coming out of earnings at all." While not objecting, the firms are paying the tax, and as a result a very large amount of money has been received by the treasury. They complain, however, that for their type of industry the tax is altogether too high. I believe they are correct. It is only necessary for us to follow the annual statements made by large bakery concerns in recent weeks or months to learn that in the majority of cases dividends have been passed not. only on common stocks, but on preferred stocks and in some cases on debentures. That will show the condition of the baking industry. These men say that a tax of six per cent on the finished product is altogether too high, and the industry cannot stand it. I asked what their remedy would be, and I find it is the same as that put forward by smaller bakeries to which the Minister of Finance referred, that is that the tax should be placed upon the ingredients that are now taxable and not upon the finished product.

Now the industry to-day is not in good condition. These bakers tell me, not only the large ones but the small ones, that their greatest competition is that of the housewife who is doing her own baking. That is competition that they cannot possibly meet, it is a matter of necessity with these people, and that is where the great competition is. These small bakers are complaining that they are being forced into bankruptcy right and left. The larger bakers are finding difficulty. All that has been done this year by way of remedy as far as I can see-and it is not a remedy; I do not say that in any disrespect to the minister-is to add to the number who now pay the tax. Heretofore it was confined to those having a turnover of more than $5,000 a year; now that figure is reduced to $3,000. Those who under the new legislation enjoy exemption from the six per cent tax on ingredients are those who have a turnover of less than $3,000 a year; and two other classes concerned in

the baking industry, namely the hotels who do their own baking of cakes and pastry, and the restaurants doing the same thing. They pay not on the finished product but simply on the taxable ingredients. The large bakers say they suffer from that competition and that it is an injustice to them. I have made strong representations to the minister, as strong as I could. I feel yet that he might give the question further consideration and gran.t to these bakers what they ask. They suggest that the government put the tax on the ingredients, that is ingredients no-w taxed, and if the government want to add to that list, say powdered milk or frozen eggs that enter into the manufacture of these products, they say the government would not only get all the revenue chargeable but would get it without cost and without irritation. At the present time the collection of this tax is causing a great deal of irritation among the baking fraternity. It seems unfair that that class should be unnecessarily irritated over a tax that they cannot possibly pay, because it is not coming out of revenue, it is coming out of capital or, as one individual said, it is adding to our deficit yearly. In the city of Toronto many of these smaller bakers are finding it impossible to pay this tax, large amounts of arrears have accumulated against them, and the department have found it necessary to give them some leeway. I have no doubt the minister knows it, at any rate it is true that they are accepting small weeldy or monthly payments as the revenue of the concerns makes it possible to pay. In many cases even these instalments are not being paid. I know that one of the large concerns in Toronto is not paying the tax to-day because it cannot, yet it is threatened with action or penalty under the act. That is, action is taken in the exchequer court, judgment is filed against the firm and the sheriff put in if necessary. But I must give this credit to the Minister of National Revenue, that he has not pursued that course to the limit. He is extending leniency as I have just suggested, taking weekly or monthly payments.

I think the proper method would be to place that tax upon the ingredients. The department would get every cent of it because it would be collected at the source, everyone would pay, the housewife would pay. the bootlegger in the trade would pay, and it would not be necessary to have so many agents of the department out trying to collect the tax. I appeal to the minister to make a concession to these men. On Saturday they came to me in all earnestness and wanted to know

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whether the minister would give them a further appointment that they might discuss it with him again. I said I did not think it would be much use, that the representations had been made. But if the minister thinks his mind might be changed in that regard I would like him to give these men an opportunity to make the representation, because they feel that it is a great burden that they cannot possibly carry.

Mr. RHODES:

Mr. Chairman, I try to exercise the virtue of patience. I have had three if not four deputations, taking a considerable time, presenting the views of the bakers of cakes and pies, and I can assure my hon. friend from Toronto-High Park (Mr. Anderson)-who has been most persistent in this matter; he has followed it up almost daily in the interests of those whom he seeks to serve,-that I can see no useful purpose in repeating ad nauseam representations which have already been made time and time again, especially by these very gentlemen in question. Of course if necessary and if time permits I will do the best I can to allow them to rake over the same straw they have raked over on previous occasions.

Mr. STEWART (Edmonton):

Can they not pass it on to the consumer?

Mr. RHODES:

I do not know that there is much that I can add to what was previously said in response to the query put to me in the first instance I think by my hon. friend from North Waterloo (Mr. Euler), except to say this, and I say it with all respect to my hon. friend from Toronto-High Park and to the bakers, that when they say, put the tax upon the ingredients, they are just begging the question. The ingredients, now taxable, that go into cakes and pies are currants, raisins, peel, baking powder, flavourings, jams and yeast at the half rate. They represent a trivial fraction of the revenue which is involved in the sales tax. Of course if they say, tax all the ingredients, it means that they would like to put the sales tax on flour, salt, sugar, lard, eggs, milk, etc. We can fancy how popular that would be with the people. So I say to my hon. friend with all respect, and without desiring to say anything to which exception can be taken, that the suggestion to tax the ingredients in lieu of sales tax on these articles is simply begging the question.

I am advised by the Department of National Revenue that some of these small bakers are in arrears. But the sheriff has not been put in; they are being given reasonable latitude to enable them to pay their tax. I repeat briefly what I said a moment ago, thalt

if this sales tax were removed to-morrow the small baker, as the small shopkeeper, would have the same difficulties they have now in conducting business in competition with the chain stores and the big establishments that have arisen in recent years. Their difficulties do not arise out of the sales tax.

Then my hon. friend says with respect to some of the larger manufacturers, who are paying their sales tax, many of them without complaint, that it is either a case of adding to their deficit or taking it from their capital. I may say that that is one of the regrettable features of taxation in many cases to-day. We are imposing income tax this year, as we have other years, not upon the income which the man receives in 1933, but the income which he had in 1932, and has spent. That income tax is being taken from people who to-day have not one cent of income. In one instance I was advised by letter that a man had to borrow the money by mortgaging his house. He may or may not have told the truth, but I know there are some extreme cases. I may say to my hon. friend that I have myself had the experience of paying income tax in one year on an income that had vanished, and I was obliged to go to the bank to borrow the money to enable me to pay the tax. But that experience is not new or unusual. If we could devise a form of taxation which could be applied by means of some instrument which we could place upon a man's head and by means of which we could tell exactly how much taxation he could pay, that might be an ideal method, but we cannot do that; we have to lay down taxation principles along some general lines, and the best designed form of taxation will cause hardship in individual cases; there is no question of that.

Then my hon. friend said he hoped we would reconsider this matter. I would give him the same reply I gave the hon. member for Antigonish-Guysborough, who made a plea with regard to the sales tax on molasses. Without giving any undertaking I am quite content that the matter should be thought over further, but the committee will bear in mind that it involves no less than $1,350,000 of revenue, based upon the business of last year, which is a very considerable item.

Mr. STEWART (Edmonton):

Before the minister sits down may I ask him how it happens that these gentlemen are so generous that they make it a charge against their business? They have the privilege that is exercised by everyone else of passing it on to the consumer. Surely the competition of the

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housewife does not prevent them from doing that. I am rather glad to see an instance of this kind; it is the first that has come to my notice.

Mr. ANDERSON (High Park):

In reply to that very suggestion may I say that the bakers tried that. The Consolidated Bakery Comr pany tried it, but it only lasted a week; it could not be done.

Mr. STEWART (Edmonton):

For what

reason?

Mr. ANDERSON (High Park):

I would ask the minister what was the reason for exempting the hotels and restaurants, who pay only on the ingredients. Why are they exempted? We have many large hotels such as the Chateau Laurier and the Royal York who do their own baking, and the bakers want to know why they should be exempted when the men who do nothing but baking are taxed.

Mr. STEWART (Edmonton):

The bakers want a monopoly of the business.

Mr. ANDERSON (High Park):

No, they want to be on the same basis as the hotels and restaurants.

Mr. RHODES:

I can hardly give a complete answer to my hon. friend at the moment, but I think the answer in a general way is comparatively simple. The hotel is not in competition with the baker; it cooks for its patrons. That is a recognized matter of hotel practice. I do not know that any other answer is necessary; they are not merchandizing cakes and pies, as are the bakers. You might as well say that we should walk into a house where the housewife is baking and apply the sales tax to the cake or pie in the oven.